Popular, Inc. (BPOP)

How it makes money

Popular generates revenue primarily from net interest income (approximately 57% of revenue) earned on its loan and investment portfolios. The remaining revenue comes from non-interest sources including deposit service charges ($39.1 million in Q3 2025), debit card fees ($28.1 million), credit card fees ($32.7 million), asset management and insurance fees ($29.5 million), and other banking services. The company benefits from a substantial deposit base, particularly Puerto Rico government and public sector deposits totaling approximately $19.5 billion, which provide a stable, low-cost funding source for lending operations.

Revenue by segment

Popular benefits from substantial scale advantages rooted in its dominance of Puerto Rico's banking market. The company controls approximately 50% of deposits in Puerto Rico, creating network effects through a vast retail deposit base of millions of accounts that is less interest-rate sensitive than wholesale funding. Switching costs are high due to deeply embedded customer relationships, extensive branch networks, and integrated digital capabilities through the Mi Banco platform. Brand equity is substantial—Popular is the most recognized financial brand in Puerto Rico with 130 years of history. The company also benefits from asymmetric access to low-cost government deposits ($19.5 billion or ~30% of deposits), which competitors cannot easily replicate. Average ROE of 15.7% compared to the banking sector average of 7.5% demonstrates the economic strength of this moat.

Demand for Popular's services is moderately cyclical, tied to Puerto Rico's economic conditions. In 2025, the Puerto Rico economy showed momentum with positive employment trends, stable consumer spending (credit and debit card purchases +5%), and growth in sectors such as construction, tourism, manufacturing, and reshoring activities. However, Puerto Rico remains economically dependent on federal support and subject to demographic headwinds from population outflows. The company's significant exposure to commercial real estate (52% of loan portfolio) and Puerto Rico government operations adds cyclicality to credit demand. Mortgage lending showed modest growth, while commercial and construction loans drove overall loan expansion.

Key risks

• Concentration in Puerto Rico economy — Approximately 80% of revenue comes from Puerto Rico operations. The territory's economy has historically been volatile, subject to population outflows, and dependent on federal support. Any significant downturn in Puerto Rico's economic activity, employment, or government finances could materially impact the company's profitability.
• Government deposit volatility — Puerto Rico government and public sector deposits represent approximately 30% of total deposits ($19.5 billion across ~2,000 accounts). The timing and magnitude of these deposits are difficult to forecast due to Puerto Rico's reconstruction efforts and public utility developments. Unexpected outflows could require higher-cost funding alternatives.
• Credit quality deterioration — Non-performing loans increased significantly from $311.6 million in Q2 2025 to $498.3 million by Q4 2025. The company recorded discrete commercial credit events including a $71 million charge-off and approximately $129 million of new commercial and industrial non-accruals, indicating emerging credit stress.
• Interest rate risk — Changes in interest rates directly impact net interest income and the market value of the company's assets and liabilities. A significant decline in interest rates could compress net interest margins and reduce earnings.
• Cybersecurity and operational risk — Cybersecurity incidents could adversely impact operations and financial condition, divert management attention, harm customer relationships, and subject the company to regulatory scrutiny and increased costs.

Top customers account for 30% of revenue

Puerto Rico government and public sector deposits represent approximately 30% of total deposits at $19.5 billion as of end of 2024. These deposits are spread across approximately 2,000 accounts, reducing concentration of any single government entity. Beyond government deposits, the company serves over 2 million individual customers in retail and commercial segments, providing significant diversification. The company does not disclose material concentration in any single private customer or customer group.